Series 53

What Is the Series 53 Exam?

The Series 53 exam is a licensing test that permits an individual to supervise the municipal securities activities of a securities firm or bank dealer. The Series 53 exam is administered by the Financial Industry Regulatory Authority (FINRA) and is one of many Municipal Securities Rulemaking Board (MSRB) exams. The Series 53 exam is also known as the Municipal Securities Principal Qualification Examination (MP).

Understanding the Series 53 Exam

The Series 53 exam qualifies a financial professional to become a licensed Municipal Securities Principal. Municipal Securities Principals can underwrite, trade, and buy or sell municipal securities. The exam also permits the holder to render financial advisory or consultant services to issuers of municipal securities, as well as permits communications with customers about the aforementioned activities. In addition, the exam permits the holder to do the record-keeping, as well as the processing, clearing, and safekeeping of municipal securities, and the training of principals and representatives.

Series 53 Exam Questions

The Series 53 exam consists of 100 multiple choice questions completed over three hours. A score of 70% or better is required to pass. Test-takes are not allowed to use any outside reference materials. Question topics cover not only the basics of how municipal securities are created and traded but also settlement practices, record-keeping, and sales supervision.

The exam's questions cover six topics, which may be broken down into subtopics (see sample questions listed below). A full list can be found in the MSRB's Municipal Principal Qualification Examination (Series 53) Content Outline:

1. Federal Regulations (four questions): Understanding the regulatory process and rulemaking agencies, as well as the practices that govern the municipal securities business. Also, knowledge related to the Securities Exchange Act of 1934, antifraud provisions, SEC Rules, the Dodd-Frank Wall Street Financial Reform and Consumer Protection Act, the Securities Investor Protection Corporation (SIPC) and its purpose.
2. General Supervision (23 questions): Responsibilities and rules governing a municipal securities principal, industry terms, registration, qualification and continuing education requirements, implementation and monitoring of compliance systems and procedures and disclosures.
3. Sales Supervision (25 questions): Supervisory tasks, as well as rules, record keeping and approvals needed to open and maintain client accounts. Practical knowledge of appropriate investments, as well as what is an improper or prohibited sales activity. Rules and procedures for handling customer complaints.
4. Origination and Syndication (23 questions): Understanding a dealer's obligations when serving as an advisor to an issuer, defining the advisory relationship, documenting it, as well as understanding required disclosures and responsibilities connected to official statements, both as a financial advisor and an underwriter. Also, order types and their disclosures, administration rules related to the role of lead manager of a syndicate.
5. Trading (10 questions): Demonstrate an understanding of municipal security quoting rules, record-keeping responsibilities for principal and agency transactions, procedures and timeframes for reporting transactions, understanding responsibilities related to CUSIP numbers in secondary market trading, and understanding the prohibition against reporting fictitious trade reports.
6. Operations (15 questions): Understanding what is needed to confirm transactions, the settlement process for trades and the mechanics of delivery of securities and the requirements for handling trade or settlement problems. Also, knowing what records need to be maintained, as well as timeframes for maintaining them.

Series 53 Sample Questions

These sample questions, provided by the MSRB, are similar to the format and content found in the Series 53 test but are not actual test questions. The answers are provided below.

1. What action by an associated person of a dealer would cause the dealer to be prohibited from engaging in municipal securities business with that issuer?

1. A non-MFP executive officer makes a contribution to an official of the issuer.
2. An MFP contributes $100 to the campaign of an issuer official in a state where he does not reside.
3. An MFP contributes $250 to the campaign of an issuer official in the city where he lives.
4. An associated person whose municipal securities’ activities are limited to sales to customers contributes $300 to an issuer official.

2. Reclamation of municipal securities is permitted for one business day following delivery for which of the following reasons?

1. If there is a disagreement as to the purchase price
2. If a coupon is discovered to be mutilated
3. If the CUSIP number is not imprinted on the certificates
4. If the securities go into default

3. Which two of the following statements correctly describe a manager’s obligations with respect to the disclosure of syndicate expenses to account members?

1. I and III
2. I and IV
3. II and III
4. II and IV

4. Senior managers of municipal securities syndicates must maintain, for each syndicate account, books and records that show all of the following information EXCEPT:

1. The terms and conditions governing the operation of the syndicate account
2. A reconciliation of the profits and expenses of the syndicate
3. All allotments of those securities to syndicate members and the price at which sold
4. The names and addresses of each customer purchasing securities from a syndicate member

Answers: 1. (2); 2. (2); 3. (3); 4. (4)